The Genesis of a Revolutionary Crypto Trading Concept

The concept of the perpetual swap, also known as a perpetual future, was conceived on a hiking trail in Hong Kong in 2015. Ben Delo, co-founder of BitMEX and a mathematician, was discussing a persistent problem with a friend named Bavik, a derivatives trader. BitMEX had experimented with various futures contracts, including quarterly, monthly, weekly, and even daily contracts, but none of them met the needs of their customers. The customers wanted a product that resembled spot trading but offered the leverage of a derivatives exchange. Delo asked, "What if a future never expired?" Bavik's response was that it would be mathematically worth infinity. However, he suggested charging traders the bitcoin overnight rate to address this issue. Delo decided to build this concept, which ultimately led to the creation of one of the most influential financial products of the 21st century. The perpetual swap was launched in May 2016, with a daily funding rate that kept the contract price aligned with the spot price. Initially, the funding rate was derived from external lending markets, but it was later adjusted to a dynamic rate based on the swap's trading activity. This innovation allowed BitMEX to become the most liquid bitcoin market, processing $3-4 billion daily. The perpetual swap's success has been so significant that every major derivatives exchange now offers a similar product, with an estimated $40-50 trillion in annual turnover. The concept has also attracted the attention of traditional finance regulators, with the potential for it to be listed on equities in the future.